Report Panama Port Development

Report

Panama Port Development

Investment Opportunities in the Maritime Sector 2017

Embassy of the Kingdom of the Netherlands in Panama | Embassy of the Kingdom of the Netherlands in Panama | Embassy of the Kingdom of the Netherlands in Panama | Embassy of th

lines navigate their global shipping routes. This has already born fruits as the expansion has led to an impressive increase in the ‘Hub of the Americas’ aggregated volume handled: the expanded Canal has registered an increase in tonnage of 23% in its first year after expansion, Over the past decade, Panama’s strategic location and its while its revenues increased 12.5% during the same period of integration into the world economy have converted the country time. into the fastest growing economy in Latin America and the Caribbean; transforming it into the ‘Hub of the Americas’. The The continuous developments around the Canal present country seeks to continue being competitive by amplifying challenges for which Dutch expertise can provide solutions. services and forming clusters to improve the interconnectivity Within the maritime sector six central developments can be between all sectors. In the government’s five-year plan for 2015- identified: 2019, a total public investment of USD 6.4 billion in transport 1. Peak hours and logistics has been indicated, of which USD 109 million will 2. Automation specifically be invested in maritime infrastructure. 3. Sustainability 4. LNG Market Furthermore, Panama has recently established diplomatic ties 5. Agro-logistics with China, the second biggest user - after the US - of the 6. Maritime Auxiliary Services Panama Canal. As it is expanding its global trade ambitions with its ‘One Belt One Road’ infrastructure-building initiative, The expansion of the Panama Canal has led to the establishment access to the eastern coasts of both Latin America and the US is of new projects in the maritime sector, thus creating business expected to be of growing importance for Beijing. opportunities for Dutch companies. This report provides an overview of the projects currently being developed and carried In June 2016, the largest infrastructure project since the Panama out by the Canal Authority (ACP), the Maritime Authority of Canal’s opening in 1914 was completed. The $5.25 billion Canal Panama (AMP) and other projects and the opportunities they expansion has tripled its capacity and changed the way shipping provide for Dutch business.

Table of Contents Caribbean. Average annual growth has been 7.2% between 2001 and 2013; more than double the regional average. Growth ‘Hub of the Americas’...... 1 reduced slightly to a percentage of 5.4 in 2016. By 2017 the forecast remained at 5.4%1.In the medium term, Panama’s Table of Contents ...... 2 growth is likely to remain one of the highest in Latin America, 1. Introduction ...... 2 between 6 and 6.5%. Public investments are also likely to remain high, owing to the construction of the second metro line and 2. The Bigger Picture ...... 2 the additional traffic generated by the expanded Canal. In the 3. The Panama Canal ...... 3 government’s five-year plan for 2015-2019, a total public 4. Developments in the Maritime Sector ...... 4 investment of USD 19,5 billion has been indicated. Transport and logistics have been named key sectors by this 5. China’s Increasing Influence ...... 6 administration, receiving a total public investment of USD 6,4 6. Panama’s Ports ...... 6 billion of which USD 109 million will specifically be invested in maritime infrastructure2. Prospects for high growth in the 6.1 PSA Panama International Terminal ...... 7 coming years are also supported by emerging opportunities for 6.2 Manzanillo International Terminal ...... 7 private sector-led growth in key sectors, such as transport and 6.3 Port of Cristóbal ...... 8 logistics, mining, financial services, and tourism.

6.4 Port of Balboa ...... 8 The economy of Panama is centered on a highly-developed 6.5 Colon Container Terminal ...... 8 service sector, which represents more than 75% of gross 7. Opportunities for Dutch Business ...... 10 domestic product (GDP). The Panama Canal and use of the U.S. dollar strengthen the globally-oriented service economy. The 7.1 The Canal Authority (ACP) ...... 10 Panama Canal is essential to global trade and accounts for 7.2 The Maritime Authority (AMP) ...... 12 almost 10% of the country’s GDP. Other important components of the service economy are the Colon Free Trade Zone (CFZ), 7.3 Other Projects ...... 14 which is the second largest free zone in the world. Panama also 8. Maritime & Logistics Events 2018 ...... 15 has a large logistics sector, as well as a modern banking- and insurance industry. The agricultural sector has lost importance 1. Introduction over the years, accounting for less than 3% of GDP today. The main cash crops produced in the country are bananas, corn, coffee and sugar. In this report, current business opportunities in the Panamanian maritime sector are identified. Firstly, a short introduction is given on the economic characteristics of Panama whereupon the Figure 1. Key numbers Panamanian economy. recently completed expansion of the Panama Canal and its • Panama has a GDP of USD 55.2 billion and a GDP per implications are discussed. Thereafter, six developments in the Capita of USD 12,140. maritime sector are discussed, followed by an overview of • The country was ranked 42th in the 2016 Global Panama’s five main ports. The report concludes with the current Competitiveness Index with an overall score of 4.51 on a 1- maritime projects and the opportunities this offers for Dutch 7 scale (low-high) . business. • Panama City was ranked 1st in the 2015 Doing Business in

Central America and the Dominican Republic index by

the World Bank. 2. The Bigger Picture • The country was ranked 40th in the 2016 Logistics

Performance Index with an overall score of 3.43 on a 1-5 Over the past decade, Panama’s strategic location and its scale (low-high). integration into the world economy have converted the country into the fastest growing economy in Latin America and the

1 http://www.worldbank.org/en/country/panama/overview -2019.pdf 2 http://www.mef.gob.pa/es/Documents/PEG%20PLAN%20ESTRATEGI CO%20DE%20GOBIERNO%202015

Panama wants to develop itself into a regional hub, following, As the movement of container cargo increased globally, the amongst others, the example of Rotterdam, by creating a Canal Authority (ACP) decided to focus on this segment. Hence, multimodal infrastructure system integrating the Panama Canal, in 2007 the expansion of the 77-kilometer waterway began with five ports, multiple airports, railways and roads. The completion a total investment of USD 5.25 billion. Since its inauguration on of the Panama Canal Expansion has increased transshipment June 26, 2016, the expanded Canal increased the waterway's volumes handled by the logistics cluster in Panama, as well as capacity to meet the growing demand of maritime trade using adding new commodities like liquefied natural gas (LNG). In larger vessels, which means that the Panama route provides order to capitalize on the opportunities, it is of essential important economies of scale. importance for Panama to invest in the creation of added value services to fully benefit from the expansion of the Panama The Panama Canal Expansion has been the largest enhancement Canal. Therefore, the development of a logistic subsystem to project since the Canal's opening in 1914. The Expansion support the agriculture sector is high on the agenda as well. included the construction of a new set of locks on the Atlantic and Pacific sides of the waterway, thereby creating a third lane of traffic, doubling the cargo capacity of the waterway. While the 3. The Panama Canal expanded locks are 70 feet wider and 18 feet deeper than those in the original Canal, they use less water due to water-savings The Panama Canal is a key world trade route. Due to its basins that recycle 60% of the water used per transit. Before the favourable geographic location, the canal facilitates a unique expansion, the existing locks allowed the passage of vessels that connection for commercial maritime routes between the could carry up to 5,000 TEU. After the expansion, the Post- Atlantic and Pacific oceans. The Canal currently serves various Panamax vessels are able to transit through the Canal, with important trade routes within the region and with Asia and up to 13,000/14,000 TEU, thus multiplying the capacity by Europe, providing a significantly shorter transit between the nearly three times. According to the ACP, currently 15 out of the Atlantic and Pacific oceans than around the notorious Cape 29 liner services that transit through the Canal deploy Horn. Next to facilitating a passage, its role in transshipment neopanamax vessels. has become increasingly important.

Figure 2: Connectivity of Panama.

The recent Canal expansion has helped to generate port 2. Automation investments within Panama and raised the development of LNG Enhancing terminal productivity to capture extra cargo flows is terminals, thereby allowing the use of LNG in Panama. New foreseen through terminal expansion and the automation of opportunities offered by the expansion of the canal will thus port processes. The need for automation is becoming especially enhance Panama’s position as a logistics hub. It offers Panama relevant and pressing as Panama is dealing with a severe lack of the chance to maximally employ its geographic position, which skilled (technical) work force. is illustrated in Figure 2. Currently, Panama maintains 144 sea routes, connected to 1700 ports in 160 countries. 3. Sustainability Together with airport Tocumen, which is connected to 74 Over the years, the Panama Canal has developed a growing destinations in 31 countries, this reinforces Panama’s commitment to sustainability. The ACP, for example, has international position as the ‘Hub of the Americas’. integrated sustainability as an important pillar in its current policy: for the period 2015-2020 it has launched ‘The Panama Canal Green Route’, which is currently leading a number of 4. Developments in the Maritime Sector sustainability initiatives, such as its Green Connection Award and Environmental Premium Ranking, which reward customers The recently finished Canal expansion has already increased port who meet high environmental efficiency standards. The ranking development in the wider Central America- and Caribbean awards points based on specific environmental standards by region and has consequently also led to an increase in which carriers can improve their position in the Canal competition. Therefore, Panama’s ports are continuously classification and encourages the implementation of planning to expand their terminals to ensure they are able to technologies and standards to help reduce greenhouse gas capture the container volume increase. The amplification of emissions. Previously, the ACP made use of a ‘first come, first maritime and logistics services around the Canal should served’ policy for the transit of vessels through the Canal. consolidate the competitive position of Panama’s ports. Moreover, the development of logistic services on a national Furthermore, ACP has recently approved toll modifications, level, supporting the agro sector and regional trade, should which are scheduled to go into effect at the start of the Canal's transform the country into the ‘Hub of the Americas’. fiscal year, on October 1st 2017. For the containership segment, Within Panama’s maritime sector, six developments can be the approved tolls structure offers more attractive rates per identified: loaded containers on the return voyage, applicable only to 1. Peak hours neopanamax vessels. By rewarding ships who return loaded, the 2. Automation ACP is looking for “round the world” (RTW) services, 3. Sustainability diminishing the number of unloaded containers returning via 4. LNG Market the Canal, making the Canal route more sustainable. 5. Agro-logistics (Hub de Alimentos) Additionally, the new structure modifies the tolls charged to 6. Maritime Auxiliary Services liquefied natural gas (LNG) and liquid petroleum gas (LPG) vessels. Hereby, ACP stimulates LNG And LPG which are viable 1. Peak hours and proven cleaner fuels than heavy fuel oil (HFO), therefore As the Canal expansion has allowed for Post-Panamax ships to contributing to a sustainable energy future in the context of pass the Canal, more container ports have increased or are greenhouse gas emissions. Improvement is urgently needed planning to increase their capability of handling bigger volumes with carbon emissions from global shipping amounting to by improving efficiency. It is of crucial importance to avoid nearly one billion tons a year and rising: accounting for 2–3 per congestion at the entrances of the Canal and of the ports, cent of global GHG emissions. Finally, container/breakbulk because this could negatively affect Canal transit activity. Due to vessels will be reclassified into the general cargo segment, thus the increase in scale by the Canal expansion, the number of resulting in more attractive tariffs for customers in this category. vessels has reduced, but problems of congestion could occur during peak hours. Therefore, it is of increasing importance that Due to sustainability measures incorporated in the Canal ports will anticipate efficiently during peak times, to prevent expansion, the Canal has already reduced its CO2-emission congestion. This concerns both the ACP as well as all private port with 17 million metric tons during its first year of operations operators. For example, cranes with more capacity are needed to after expansion. facilitate a faster transit through the Canal in order to avoid congestion, which offers opportunities for Dutch companies.

4. LNG Market The proposal concerns a market research/location on agro- The expansion of the Canal has made the passage of LNG carriers logistics in Panama and is expected to be published by the end possible, thereby creating opportunities for the LNG-sector in of 2017. Panama. As can be seen in Figure 3, the Canal has undergone a significant increase in LPG and LNG carriers since the Canal is In a nutshell, the project entails, amongst other developments, suited for the transit of neopanamax vessels. Due to stricter the development of a free zone for modernized production, emission standards set by the International Maritime processing and distribution of food products on an industrial Organization (IMO), shipping is likely to experience a big shift in scale on the banks of the Panama Canal. It would consist of a fuel: from bunker oil to LNG. Currently, the LNG market is not bulk terminal, cold storage and processing facilities. In this regulated, thereby making the regulation of access to LNG zone, agricultural crops (and fish and meat) from Central and terminals that will be built in the near future uncertain. South America can be consolidated and processed for export to Asia, the US and Europe. The agricultural products can enter the The Panamanian government has already awarded three zone, be processed and re-exported without border procedures. concessions for the construction of power plants running on The new food hub would have two objectives: to connect LNG including the permission to build their own LNG terminal local production, but above all, to add value to the (see section 7.3). These concessions have been awarded to AES products that are passing through the Canal. together with Grupo Motta, NG Power (a local consortium) and Grupo Martano (a Chinese-Panamanian group). 6. Maritime Auxiliary Services Panama remains attractive for continuous improvements and 5. Agro-logistics investments in maritime auxiliary services (small shipyard, One way for Panama to create added value is by developing a ballast water treatment, tug services, bunkering, maintenance logistic system to support the agricultural sector. To create a dredging, etc.) and in its connectivity improvements (eg. short better picture of the different opportunities for the development sea shipping or container barge services). The development of a of a so-called ‘Hub de Alimentos’ or ‘Food Hub’, a Dutch shipyard in Panama has already been a long-lasting desire: the consultancy will write a masterplan for the Ministry of shipyard at the Pacific side (MEC) is not providing optimal Agricultural Development (MIDA). services, whilst there is no shipyard yet on the Atlantic side.

Figure 3: Cumulative monthly Panama Canal traffic by market segment from October 2016 to July 2017 of fiscal year 2017.

However, the potential of developing a shipyard is limited Furthermore, China and Panama are currently negotiating the because the ships passing through the Canal mainly carry cargo establishment of a Free Trade Agreement and China has and need to continue their journey as quickly as possible. The expressed high interest in the construction of a railroad between Atlantic side has several ship (repair) yards close by. A smaller Panama City and David, a city close to the Costa Rican border. maintenance yard for smaller service vessels (tugs/bunkering Besides, a Chinese company is developing the Puerto Panamá- etc.) might be feasible in the Canal. Cólon in Isla Margarita (see section 7.2) and Chinese state firms have expressed interest in the development of the West Bank ACP tries to continuously stimulate investment in maritime once the country opens a tender for it at the end of 2017 (see auxiliary services, for example at the West Bank in Cocolí, which section 7.1). offers supply opportunities to Dutch companies.

6. Panama’s Ports 5. China’s Increasing Influence Panama has a network of seaports that provides a variety of China is the second biggest user - after the US - of the Panama services to containerized, liquid and general cargo, as well as to Canal. The Canal is a vital shipping route for China and as China passengers in cruise terminals. Panamanian seaports in the is expanding its global trade ambitions with its ‘One Belt One National Port System (NPS) are divided into two groups: state Road’ infrastructure-building initiative, access to the eastern ports and private ports. Private ports have been given to coasts of both South America and the US is expected to be of terminal operators after a privatization process of former state growing importance for Beijing. ports (concession). State ports are still operated by the government under the management of the Panama Maritime In June 2017, Panama has cut long-standing diplomatic ties Authorty (AMP), and basically provide dockage and other with Taiwan in favour of establishing relations with China. Last related services for local users and short-sea services. The figure November 2017, Panama opened its first ever Embassy in Bejing below (Figure 4) gives an overview of the five biggest ports, their during a diplomatic mission followed by the signing of 19 operators and the annual throughput (in TEU) for 2016. bilateral cooperation agreements in trade, tourism, finance, the maritime sector, security and (air)transport. Comparing the annual throughput from 2015 to 2016, the ports show different growing rates. Balboa had a reduction of 8% Most importantly, Panama received the status of ‘Most Favored between both years, while MIT showed a 7.3% decrease in its TEU Nation’, which means that ships with the Panamanian flag will movements. CCT presented a reduction of 19.9%, as well as receive benefits in port tariffs and preferential treatment in the Cristobal with a decrease of 2.3% in its TEU movements. ports of the People's Republic of China.

Figure 4: Overview of main ports in Panama, their operators, and container movement in 2016.

Port Operator TEU in 2016

Pacific side 1 Port of Balboa Panama Ports Company (member of the Hutchison Port 2.800.000 Holdings, HWL) 2 PSA Panama Terminal Port of Singapore Authority International 160.000

Atlantic side 3 Manzanillo International Terminal Carrix, Inc. and the Motta and Heilbron families of 1.800.000 (MIT) Panama

4 Port of Cristóbal Panama Ports Company (member of the Hutchison Port 790.000 Holdings, HWL) 5 Colon Container Terminal (CCT) Colon Container Terminal, S.A. (a subsidiary company of 630.000 Evergreen Group)

PSA decreased 26.9% in its TEU movements. On average, the Development and Business Opportunities period 2015-2016 thus registered a reduction in the total Currently, the terminal has a capacity of 450,000 TEU. With the number of containers handled by the main seaports in expansion, which is set to be finished by the end of Panama. The preliminary data obtained from the Panama 2017/beginning of 2018, the port is expected to have a full Maritime Authority (AMP) shows an aggregate volume of 6.3 potential of handling 2 million TEU. million TEU (not including the port of Almirante) for 2016, which is a decrease of almost 9% compared to the aggregated The development of the terminal can be split up in two phases. volume of 6.9 million TEU in 2015. The first phase, the Expansion phase, has already been finished. The second phase, a USD 450 million investment, comprises the Figure 5: Panama’s Total Annual Container Movement (TEU). dredging and excavation of approximately 4 million m³ of material to a depth of 16.3 m, as well as the construction of an 800-meter quay wall. The dredging works are executed by Jan De Nul Group. The quay wall extension has been awarded to the Joint Venture Jan De Nul-Saipem. PSA currently does not leave any new opportunities for Dutch companies.

Contact PSA Panama International Terminal, S.A. Tel: +507 378-3800 http://www.psa.com.pa/ Nevertheless, the expansion of the Panama Canal has already led to an impressive increase in the aggregated volume handled: the 6.2 Manzanillo International Terminal expanded Canal has registered an increase in tonnage of 23% in its first year after expansion, while its revenues increased Location with 12.5% during the same period of time. On average, 5.9 The Manzanillo International Terminal (MIT) is located on the vessels are currently transiting the expanded Canal per day, Atlantic Coast of Panama, near the Northern entrance of the surpassing original forecasts of two to three daily transits for the Panama Canal. It is side-connected to France Field, the largest first year of operation. For the next fiscal year, which will start on warehousing area of the Colon Free Zone. the 1st of October 2017, ACP-estimations predict a record of 429,6 million tonnage and more than 13,000 transits, including 2,335 Port Management and Type neopanamax. MIT is managed by Carrix, Inc. and the Motta and Heilbron families of Panama, which received a concession till December 6.1 PSA Panama International Terminal 2033. It is a privately managed, deep water port.

Location General Information PSA is located at the Pacific western-side entrance of the Canal MIT was originally built as a specialized container terminal. in the former US Rodman naval base. Additionally, it handles vehicles and rolling equipment, known as Roll on-Roll off, and Project Cargo. It was built on a former US Port Management and Type Naval base at Coco Solo Sur. Transshipment operations The terminal is operated by PSA Corporation Ltd. It is a deep- represent 85% of their containerized activity. water port, suited for general container cargo. Development and Business Opportunities General Information MIT finished a USD 270 million worth expansion at the end of The port has not been able to reach its full potential of handling 2015. The expansion increased MIT’s capacity from 2.0 million 450,000 TEU yet, due to its lack of a railroad and decent highway TEU to 4.0 million TEU, and included the construction of a 400- connection. This makes the port mostly suited for meter quay for neopanamax, with 4 super-Post Panamax cranes, transshipment onto other vessels. Its trade flows are for the automating the container yard, dredging to 16.5 m of depth most part, namely 90%, made up of transshipment, while the around the Post-Panamax berths, and adding 6 yard cranes other 10% is made up of 5% of import and 5% of export. automatic stacking (ASCs).

Contact Port Management and Type Manzanillo International Terminal - Panama, S.A. The Port of Balboa is managed by Panama Ports Company (PPC) Avenida Molten, Coco Solo Sur, P.O. Box 0302-00239 which is a member of Hutchison Port Holdings, HWL, and also Tel: +507 430-9800/9900 manages the port of Cristóbal at the Atlantic. It is a privately [email protected] managed, deep water port. www.mitpan.com General Information 6.3 Port of Cristóbal Balboa is the only container terminal fully operating in the country to serve the many shipping lines for loading, Location discharging and transshipping operations from the Pacific basin The port of Cristóbal is located in Limon Bay at the southern east to the region. The port is the largest transshipment container part of Colon City and at the Atlantic entrance of the Panama port throughout Latin America, with an annual average of 3 Canal. It is one of the most valuable multimodal allies of the million TEU. This port manages containers, Ro-Ro, dry and Colon Free Zone. liquid bulk, and general cargo. Its trade flows are similar to those of the port of Cristóbal, namely 95% is made up by Port Management and Type transshipment, while the other 5% is spread over import and The port of Cristobal is managed by Panama Ports Company export. (PPC) which is a member of Hutchison Port Holdings, HWL. It is a privately managed, deep water port. Development and Business Opportunities Panama Ports Company has finished the expansion of this port General Information at the end of 2015, increasing its capacity from 4 to 5 million The port of Cristóbal has an annual capacity of 2.0 million TEU, TEU. Balboa has been developed from two separate piers, handling amongst other general cargo, passengers, fishery, originally built for general cargo, to a modern terminal capable tankers, tug and pleasure crafts. Furthermore, the port offers an of simultaneously receiving up to two Post-Panamax, two easy access to the Colon Free Trade Zone. Its trade flows are for Panamax and a Feeder. Partly due to the fact that PPC does not the most part, namely 95%, made up by transshipment, while have a lot of land left around this port for expansion, no new the other 5% is spread over import and export. investments are planned, thus not leaving any opportunities for Dutch companies at this moment. Development and Business Opportunities The Port of Cristóbal does not have further expansions planned. Contact The only recent investment made was in a mobile crane, Hutchison Ports PPC allowing management of larger projects and better control of Avenida Arnulfo Arias Madrid, Edificio 1501 the general cargo loads. The Port of Cristóbal does therefore not Tel: + 507 207-5100, opción 0 leave any opportunities for Dutch companies at this moment. [email protected] https://www.ppc.com.pa/ Contact Hutchison Ports PPC 6.5 Colon Container Terminal Avenida Arnulfo Arias Madrid, Edificio 1501 Tel: + 507 207-5100, opción 0 Location [email protected] The Colon Container Terminal (CCT) is located in Coco Solo https://www.ppc.com.pa/ Norte, province of Colon. This seaport forms an ideal site for transshipment and cargo inbound/outbound to and from the 6.4 Port of Balboa Colon Free Zone. At the Atlantic entrance of the Panama Canal, CCT serves to the regional markets of the Caribbean, North, Location South and Central America with shipments mainly originated in The Port of Balboa is located at the Pacific east side of the Canal. the Far East.

Port Management and Type With this expansion, which is expected to be finished by the end CCT is managed by the Taiwanese Evergreen Marine Corp. which of 2017, the terminal will increase its capacity from 1.5 TEU to a extended its license for another period of 20 years in 2016. It is a full potential of handling 2.4 million TEU. The expansion privately managed, deep water port. counted for a total investment of USD 600 million, of which USD 150 million was spent on the 4th berth. CCT does not have General Information further expansions planned and does thus not leave any CCT is a modern port specialized in handling containers, general opportunities for Dutch companies at this moment. cargo and rolling stock. Contact Development and Business Opportunities Colon Container Terminal, S.A. The Colon Container Terminal is currently in its last phase of the Randolph Road, Coco Solo North construction of a 4th berth which went together with the +507 430-9500 purchase of additional cranes and additional container storage. http://www.cct-pa.com/

Figure 6. Location of the five main ports of Panama.

7. Opportunities for Dutch Business These projects concern the construction of the Port of Corozal, the development of a Roll-on/Roll-off port and a Logistic Park, Although there are no direct opportunities regarding Panama’s both located at the West Bank, and a storage plant for liquefied five main seaports as described above, the expansion of the natural gas (LNG). Panama Canal has led to the establishment of new projects in the maritime sector and thus creating business opportunities for Port of Corozal Dutch companies. Figure 5 gives an overview of all foreseen The new port of Corozal is one of the biggest new developments maritime projects with the best possible estimation of when by the ACP, with a total investment of USD 750 million. The tenders are expected to be released. This is merely meant to give project is planned to be developed in Corozal, which is located an indication of what to expect on the short term, as well as on on the east bank of the Pacific entrance of the Canal. If the the long term. As the ACP is Panama’s frontrunner when it development of this port eventually takes place, it is expected to comes to diversification and project development, their plans become the biggest container terminal at the Pacific side. The are presented first. Next, the development plans of the AMP, as Corozal project will be developed in two stages: first a 1350- well as private developments are presented. meter dock and a container park with capacity of 3.2million TEU will be constructed, which will be followed by the construction of a second dock of 731 meters, with a capacity of 2.1 million 7.1 The Canal Authority (ACP) TEU. Due to its location on the Pacific side, the construction could result in technical challenges – such as the coordination The ACP is currently focusing on four different projects, aimed between ships passing through the Canal and ships entering and at offering services of added value and a better employment of leaving the docks - for which Dutch expertise the opportunities that are created by the expansion of the Canal. could potentially provide solutions.

Figure 7. Current maritime projects and their corresponding investment, and tender.

Project Investment in USD Estimated tender release

ACP Port of Corozal 750 mln Not clear yet Logistic Park 1.7 bln January 2018

RoRo Port 200-300 mln First trimester 2018

LNG Terminal Not clear yet Not clear yet Fourth Set of Locks 16-17 bln Not clear yet Tugboats Not clear yet March/April 2018 Floating Dry Dock 2018 350 T Floating Crane 2018

AMP Port of Armuelles 16.2-22.2 mln Not clear yet Port of Aguadulce Not clear yet Not clear yet Port of Vacamonte Not clear yet Not clear yet Fuerte Amador Cruise 165 mln Already tendered Panamá-Colón Container Port 1 bln Already tenderd

Other Projects Bahia de las Minas 120 mln (1st phase) Already tendered Martano Terminal 1 bln Already tendered AES Terminal 1.15 bln Already tenderd PATSA Terminal Not clear yet Not clear yet Oil Pipeline Tocumen Not clear yet Not clear yet

The tender has faced some problems due to the controversy of be located between the Centennial Bridge and the container the project. The Panama Canal Authority gave its go-ahead for terminal of PSA Panama. The masterplan by STIG Delta and the port at the end of September 2016, and published the Antea analyzes the different markets that transit through the specifications and requirements on the 8th of October. Four Canal, in order to determine which markets have the highest companies were prequalified earlier in 2017 to participate in the growth potential following the expansion of the Canal, and for final tender: the Dutch APM Terminals B.V., France’s Terminal how many markets it can develop logistic activities and added Link, Singapore-based PSA International Pte., Ltd and the Dutch value to Panama. Due to the big scale of the project, ACP has Terminal Investment Limited, S.A., but none of them eventually decided to carry out the project in different phases. The project filed a bid. Among other requirements, the failed tender requires an investment of USD 1,700 million to cover the first consisted of a minimum container movement rate of 12 dollars, 1,200 available hectares, after another 1,100 hectares will be instead of the usual 9-dollar rate. Besides, in the initial tender incorporated, set to be developed in a period of five years. The dredging would be carried out by ACP and the port would be ACP has planned to finalize the documents for the tender by provided with railroad access. However, the ACP did already December of 2017, or January 2018. announce that the dredging will probably be done by the ACP itself and will thus most likely not be part of the upcoming Roll-On/Roll-Off Port tender. The ACP has plans for the construction of a Ro-Ro port, which will be part of the Logistic Park. The investment for this Ro-Ro The ACP indicated that it is not yet clear when the new tender port includes the construction of a dock, vehicle storage yard specifications for the concession of the project will be ready and vehicle processing areas in an area of approximately 43 for publication. The ACP is currently in a consultation process hectares. This future roll-on-roll-off port will be located at the with the companies that participated in the failed tender and west side of the Pacific entrance of the Panama Canal. Because other companies interested in the concession, to improve the of its strategic location on the international trade route, it is tender specifications and make them more attractive. There are expected to become a pivot point that would serve sub-markets currently six companies interested in the Port of Corozal. in the region. The ACP is currently in the process of preparing the public tender for the concession of the Roll-On/Roll-Off Figure 8: The two development phases of Corozal. port.

The tender is set to be published during the first trimester of 2018. The project requires an investment between USD 200-300 million and will be developed in two phases. The Ro-Ro port is estimated to handle till 500.000 vehicles on an annual base. Simultaneously, a vehicle processing center will be incorporated that adds value to the cargo. The RoRo port could be used by Latin American car assembly plants as a distribution center and to realize modifications to the heavy equipment, by adding value and thereafter re-exporting them to different countries in the region, thereby boosting the hiring of technical labor.

LNG Terminal Development West Bank Due to the Canal expansion, more than 90% of the global LNG Commissioned by the ACP, Dutch STIG Delta and Antea have fleet can now transit the waterway for the first time in history, provided a master plan for the development of the Panama opening a new market and allowing LNG producers in the Canal West Bank (1200-hectares area). The plan foresees United States to ship natural gas to Asia at competitive prices. investments in logistics parks, ports, railways and road connections, ensuring optimum commercial use of the area. In order to capitalize on this growth, the ACP is interested in developing LNG-related infrastructure projects, including an Logistic Park import terminal that will provide LNG bunkering and The ACP is currently analyzing different business models for the redistribution capabilities. development of the Logistic Park which will offer a strategic location for distribution and added value services. The Park will

Figure 9: Panama’s Special Economic Zone

The U.S. Trade and Development Agency awarded a grant to the Short Term Tenders Panama Canal Authority (ACP) to support the planning of a On the short term, three different tenders will be released: liquefied natural gas (LNG) import terminal by carrying out a feasibility study. 1. Purchase of 6 tugboats with the option of buying 4 additional tugboats. The publication of this tender is The ACP still has to decide upon the location of the new LNG expected in March/April 2018. The type of tender is terminal. The report on the technical and financial viability of a not yet known, but it is expected to become a best terminal for Liquid Natural Gas (LNG) is in the process of being value tender. tendered and awarded. However, it is not yet clear when the 2. Floating dry dock, which will be suited for tender specifications for the terminal will be published. neopanamax vessels. ACP is currently working on the specifications to be published in 2018. Development of a Fourth Set of Locks 3. 350 T floating crane. Likewise, the tender is expected The ACP considers building a fourth set of locks in order to to be published in 2018. On the long term, ACP is better compete with the Suez Canal in Egypt. This new set of interested in purchasing a hopper dredger additionally locks would serve a new generation of ships that can carry up to to the 3 dredgers the ACP already owns (1 cutter and 2 20,000 TEU. The project is estimated to cost between USD 16 hoppers). and 17 billion. If the ACP decides to go ahead with the project, it could be completed within 15 years. Financing options include issuing bonds and the Canal’s own revenues. However, the ACP 7.2 The Maritime Authority (AMP) already indicated that more water will be needed, amongst other necessary improvements, in order to be able to build a fourth set The AMP is continuously investing in its ports in order to make of locks. The ACP is currently conducting studies on finding use of the opportunities provided by the Canal expansion. The other ways to get extra water, such as in Río Indio and Bayano. following section will provide an overview of the different projects planned by the AMP.

Port of Armuelles tender for the Port of Aguadulce was published in June 2016, but The AMP and the Latin American Development Bank (CAF) the AMP did not receive any bids before the deadline, mid- investigate possibilities to redevelop the Port of Armuelles, as October 2016. Since the first attempt in 2015 the tender well as the development of an interoceanic highway, connecting specifications had remained the same: a reference price of USD the port to the Atlantic. The port is located in the province of 53,5 million concerning a 20-years concession for the design, Chiriquí on the Pacific, bordering with Costa Rica. It has two construction, operation and maintenance of a terminal in the different deep-sea ports: one for bananas and one for oil. The Port. Despite the cancellation of tenders last year, the AMP AMP is investigating possibilities to turn the currently inactive indicates that it remains analyzing possibilities to release a new port for bananas into a multipurpose dock of around 150-300 tender. It is unclear whether this will happen under the same meters. The redeveloped port should improve agricultural conditions as the previous tenders. According to sources within exports, while simultaneously focusing on the revival of the the industry, the volume of cargo that would be moved through banana region. the port, would not suffice to make up for the payment of USD 53 million that the State has desired for the concession. The CAF approved a loan of USD 100,000 in September 2015 for a modernization of the port would lead to a decrease in costs of technical study for the realization of a viable model. The the transport of goods and create new forms of employment in objective of this study was to research the feasibility of a the region. multimodal port by determining potential users of a logistics center and the business flow needed to attract investors. The Port of Vacamonte results of the study have not been made public. The AMP has The Port of Vacamonte is a relatively small fishing port which indicated the expected costs between USD 16.3 million and the AMP would like to redevelop into a multipurpose port. USD 22.2 million, with a concession of 20 years to be awarded Studies have shown that the fish in this area might be depleted with a renewal option for another 20 years. The first expected in 20 years. Besides, Vacamonte is located at a strategic position outputs should annually be between 15,000 and 30,000 TEU, for transshipment, which creates the necessity to redevelop the with a desired 5% annual increase. Dredging will not be needed. port.

In April 2017, the American multinational Del Monte has As the port of Balboa is running pretty full, the AMP sees high reached an agreement with the Panamanian Government for the potential in the redevelopment of this port. AMP is working reactivation of the banana sector for the next 20 years. Del together with CAF on the development and is currently looking Monte is planning to invest more than USD 100 million in a into options of either tendering a master plan for development, period of 7 years, due to inactivity in the banana sector. Del or developing such a plan itself. It is unclear when new tender Monte is set to begin operations in May 2018 with the first expectations for the Port of Vacamonte will be published, but sowing of bananas on the first 970 hectares, of a total of 4,000 this is not expected to take place in the near future. However, hectares it has planned to cultivate. The disappearance of the several companies already seem to be interested in this location banana sector has led to serious economic and social problems and have been asking about LNG storage or terminal in Chiriquí. Almost half of the population has left the region in possibilities. The area around Vacamonte offers possibilities for the past decade and current unemployment is estimated at a expansion in the areas of LNG storage, container terminals, level of 60%. According to the Panamanian government, the ballast water, shipyards and the processing of waste. investment of Del Monte will lead to the creation of more than 3,100 direct and 12,000 indirect jobs. The reactivation of the Some problems that might delay the process are several banana sector would highly increase the need of the houses/slums that have been built on the official ground establishment of a multipurpose dock and would make the belonging to the port of Vacamonte. AMP is still discussing region more attractive for continuous investment. solutions for the people that are already living there and tries to avoid the construction of new houses on the territory. Port of Aguadulce The plan to modernize the Port of Aguadulce has already been Fuerte Amador Cruise Port Terminal on the table for more than 20 years. Despite multiple attempts In August 2017, the consortium Cruceros del Pacifico, formed by to re-tender the modernization of this port, no companies have the Belgium Jan de Nul Group and Beijing-based China Harbour ever filed a formal bid. It is not probable that the port will be Engineering Co. (CHEC), was awarded a USD 165.7 million modernized with private investments in the near future. At this contract by AMP to design, develop and build the Amador Cruise moment, the port is having a decrease in its operations. The last Terminal at the Panama Canal’s Pacific entrance. The

construction of a cruise terminal at the Pacific side follows after 7.3 Other Projects Panama already built a cruise terminal at the Atlantic side, namely Colon 2000 Cruise Terminal, which is already in Besides the ACP and AMP projects, several other projects can be operation and furthermore connected to our Islands via the identified in the Panamanian maritime sector. The next section southern Caribbean route: Curacao, Aruba, and Bonaire. provides an overview of these projects.

The terminal will have capacity to accommodate two ships of Bahia de las Minas 360 meters in length, with a capacity of 5,000 passengers per Since September 1, 2016, Royal Vopak has taken over operations vessel, in an area whose draught must reach 10.5 meters and be in Bahia de Las minas from Chevron, who continues to be the able to receive cruise ships at any time of the day, regardless of owner. The agreement entails operating the already existing the condition of the tide. The AMP envisions the new terminal as 509,000 cbm terminal. Next to this agreement with Chevron, a home port for large ships and it will have space for two vessels Vopak is in charge of the development of a first phase 360,000 of nearly 1,200 feet in length. It will also have passenger parking, cbm independent oil terminal at the same location. The project administrative buildings and green spaces. AMP will oversee its entails, in addition to the new tankage, complementary marine operations directly. The development will be completed within infrastructure, including jetties to handle ships of up to 80,000 24 months. In total, Panama’s government has committed more dwt. The construction started in January 2017 and will take than USD 300 million to develop Amador as a tourist and approximately 2 years. Vopak has planned to invest USD 120 residential center. million in the first phase of expansion.

Panamá-Colón Container Port (Isla Margarita) Bahia de las Minas is strategically situated at the crossroads of The Panama Colon Container Port (PCCP) will be located at Isla international trade and transportation routes for refined Margarita in Limon Bay, Colon Province at the Atlantic Coast of products. It is very well located to serve the international refined Panama. The project is positioned as an international products markets in the Panama region, and to serve the transshipment container terminal, whose annual throughput increasing bunkering needs resulting from the expansion of will be around 2,5 million TEU, including international transit the Panama Canal. container volume accounting for about 80 to 85 % and the local Colon Free Trade Zone container volume accounting for the Martano Terminal other 15 to 20 %. PCCP will be the first Panamanian port to be Grupo Martano (a Chinese-Panamanian consortium) has gained designed from its conception for the Super Post-Panamax era, the tender for the construction of an LNG terminal in Bahia de offering transit to containerships with a size of las Minas. It concerns a USD 1 billion investment for which 400x59x15.5meter. PCCP is connected to an adjacent 27-hectare construction might possibly start by the end of 2017. Part of the site being designed and developed to provide port-side logistics, project is the construction of a new jetty, of which the location is power generation, fuel storage and handling capabilities to not yet sure. This project will generate opportunities for Dutch PCCP customers and 3rd party service providers. companies in dredging and the construction of the jetty.

The concession for operation of the port has been given to the AES Terminal Chinese Landbrigde Group by the AMP, who will invest USD 1 The American AES Corporation is currently constructing an LNG billion. The construction will be overseen by the China terminal and a Natural Gas Combined Cycle (NGCC) plant at the Communications and Construction Company (CCCC). The Atlantic side of the Canal in Costa Norte, Colón. In further detail, construction has already started and is set to take a maximum of the project includes the construction of a 350 MW NGCC plant 3 years. Nevertheless, question marks are posed to the necessity with a 10-year power purchase agreement, and a 170,000 cbm of the development of this port, because of underutilization of LNG storage tank and regasification facility, to supply gas to the the existing ports. As the full potential of TEU at the Atlantic side plant, as well as to potentially serve the growing demand for of the Canal is far from being reached, some are of the opinion natural gas in Central America. The main contractor is the South that more emphasis should be put on the full employment of Korean POSCO E&C. A joint venture between the Dutch BAM the already existing ports, instead of building new ports. International and the Panamanian ICONSA is constructing the marine facilities, consisting of the LNG jetty with a 216-metre- long trestle, a 50x35m platform, four breasting dolphins, six mooring dolphins, as well as the intake and outfall structure.

Sister company BAM Infraconsult/DMC is involved in the design 8. Maritime & Logistics Events 2018 of the new jetty. The total capacity of the Costa Norte LNG terminal will be approximately 1.5 million tons annually 22 January: Panama Network Event on the occasion of visit (mtpa).The total extend of the investment is USD 1150 million. President Varela – Amsterdam, The Netherlands The NGCC plant is expected to start operations in mid-2018, while the LNG Terminal is expected to be completed in mid- 11-12 April: Latin America Ports Forum – Panama City, Panama 2019. In May 2017, AES and Engie have agreed to enter into a joint venture to market and sell liquefied natural gas (LNG) to 7-12 May: PIANC World Congress – Panama City, Panama third parties in Central America to serve on the increasing domestic and regional demand for gas. 12-14 June: Terminal Operators Conference (TOC) Europe – Rotterdam, The Netherlands PetroAmérica Terminal (PATSA) The PetroAmérica Terminal is a logistics center for oil products 21-24 October: American Association of Port Authorities (AAPA) with storage facilities for 1.1 million barrels, situated at the Conference – Valparaiso, Chile Pacific Ocean entrance to the Panama Canal. It has two quays with 39-foot-deep berthing and loading area for tanker trucks 13-15 November: Terminal Operators Conference (TOC) Americas (local market) – the ideal facilities for meeting the needs of – Panama City, Panama ships, barges and industrial customers. 75% of the Terminal’s rights are owned by a Dutch fuel terminal operator. Currently, TBC: Annual Maritime Conference of Panama (CAM) – Panama no big developments are planned, although there are plans for City, Panama the construction of scaffolds/piers for maritime auxiliary service and dredging, which might offer opportunities for Dutch For more information and questions about projects specifically companies. or developments mentioned in this report, contact the Embassy: [email protected]. Oil Pipeline Tocumen The Panamanian government is looking into options to build a pipeline to transport kerosene to Tocumen Airport. The construction of a pipeline might offer great opportunities for Dutch companies, as the Netherlands forms an excellent example for Panama with the knowledge of the existing pipeline to Airport Schiphol readily available.